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Kyrgyzstan: Politicians Wrangle Over Gold Production

Prague, 6 February 1998 (RFE/RL) -- Kyrgyzstan ranks third among the Commonwealth of Independent States (CIS) in gold production, following Russia and Uzbekistan. But, the politics associated with gold has led to a state of confusion over this perceived blessing of national wealth.

Dastan Sarygulov, president of the State Gold Company (Kyrgyzaltyn) reported last month that Kyrgyzstan produced 17.4 ton of gold in 1997. Of that gold, 96 percent (or 16.1 tons) was extracted at the Kumtor mine site, which is being developed together with the Canadian CAMECO corporation.

The Kyrgyz government and CAMECO formed a joint-venture early in 1993, and four years later, the first gold was produced at the Kumtor. It was said to be one of the biggest gold deposits in the world, with more than 500 tons of gold.

Production was delayed by politics. The opposition and the Kyrgyz Parliament accused the government of corruption, because it signed the agreement with CAMECO, without informing Parliament. This would lead to the resignation of the prime minister, Tursunbek Chyngyshev. And, it would delay the government's approval of the technical conditions of the project until May, 1994.

According to the agreement, the cost of the gold complex at Kumtor was estimated at about $277 million. But opposition and some Parliament members announced late in 1997 that the costs were over budget by more than $100 million. The leadership of the joint-venture acknowledged a cost overrun, and announced last month that the project was, in fact, about $176 million over budget.

Technical problems were cited, but the joint-venture also came up with a new estimate of how much pure gold would be extracted. Two hundred fifty-seven tons, they said.

But, the government had announced in 1993 that there was more than 500 tons of pure gold in the Kumtor deposit, so, questions were immediately raised about why the new estimate cited only 257 tons.

Opposition leaders say, that according to the 1992 agreement between the Kyrgyz Government and CAMECO, only the profits from the activity of the gold joint-venture should be shared between Kyrgyzstan and CAMECO, in a proportion of about 70 percent for Kyrgyzstan and 30 percent for CAMECO. The opposition says that, thus far, the company - not the country - has profited.

Also, the company announced late in 1996 that final refining of the gold would be done abroad. But, after several protest demonstrations in Bishkek in December 1996, it was decided that the extracted gold would be refined at the Kara-Balta complex just outside the capital, Bishkek.

The leadership of the State Gold Company sent a letter to President Askar Akayev last month, saying gold production in Kyrgyzstan increased by 1,100 percent in 1997, compared to 1996. According to the report, more than $500 million of foreign investments, linked to gold production, have been made in the Kyrgyz economy in recent years, and the gold production contribution led to a 14 percent increase in GDP in 1997. But President Akayev announced at the Davos Economic Forum on 27 January that Kyrgyz GDP had only increased six percent in 1997.

State Gold Company officials, in the letter to the President, said also that gold export alone made up 40 percent of Kyrgyzstan's total exports in 1997. However, Janbulat Baijumanov, first deputy head of the National Statistical Board, tells RFE/RL that the export of all precious metals from Kyrgyzstan last year amounted to only 27 percent of the country's total exports.

The Kyrgyz opposition says it is good that gold production has increased in Kyrgyzstan, but they question the results, and they want a clear picture of the process. They also question references in the letter from the State Gold Company, such as: the "increase in gold production has been a result of the wise management of the country by President Akayev and was available due to his sage and prescient decisions."